The U.S. natural gas market is staring down a "summer of extremes" because of record storage inventory, which means production curtailments are coming, but they won't prevent a repeat of sub-$2.00 spot pricing later this year, according to Bentek Energy LLC.

In "Gas Tank Full: Henry Hub Will Re-Test Price Floor," issued on Thursday, Bentek's analysts said the April-ending 0.9 Tcf storage surplus would force the domestic gas market to test operational storage constraints by the end of injection season, leading to extremes in injection rates, power demand and production curtailments.

To reduce storage inventories, up to 0.9 Bcf/d of production would need to be shut in from basins outside of the Northeast. "The market will elicit the needed behavior through low pricing, averaging in the $2.00-2.75 range during the peak of the cooling season, with a $1.00 handle monthly average at the end of summer," the Bentek team wrote.

Meanwhile, gas storage has been "carving out a new five-year high every week," and domestic stores "will very likely" hit a record inventory by the end of the injection season.

According to Bentek, storage operators have reported constraints in the past, which indicate that a "more realistic" gas storage capacity may be somewhere between the Energy Information Administration's (EIA) most recent 4,103 Bcf noncoincidental peak working gas capacity and the 4,488 Bcf total design capacity.

EIA's figure is equal to the sum of each field's maximum observed inventory; Bentek assumes a "generally high level of operational flexibility" from operators and has settled at 4,200 Bcf, taking into account this summer's storage expansion projects.

"Such an event will be accompanied by mandatory limits to storage activity," said the report, which noted that the maximum observed U.S. inventory was 3.9 Tcf in November 2011. The limits mean that only 65 Bcf can be injected weekly, or about 1.3 Bcf less than the 2005-2011 average weekly rate and 4.6 Bcf less than the 2008-2011 weekly rate.

Without anywhere to put the gas, demand could take the pressure off, but it will take a "strong weather-adjusted power burn" to avoid production curtailments later this summer, according to Bentek. "Even in a scenario where production remains flat for the entire injection season, total demand will have to average 6.3 Bcf/d stronger than the five-year summer average and 4.3 Bcf/d stronger than summer 2011 average demand to hit a 4.2 Tcf inventory by the end of the season."